Sharing Economy Series: How Udemy ramped up without paid advertising

Udemy is a marketplace that offers online courses to learn real world skills. Boasting more than 4 million students, Udemy currently offers more than 20,000 courses ranging from yoga and guitar lessons to SEO and Javascript. Founded in 2010, Udemy wasn’t always the booming success it is today, where it’s currently adding over 1,000 courses per month. In the early days, it faced the challenge all successful sharing marketplaces (yes, even Airbnb and Uber) face in the early days: customer acquisition.

What’s interesting about Udemy’s growth is that much of it has come through organic search, without heavy use of paid advertising as an acquisition channel.

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I recently spoke with CEO Dennis Yang, and he said Udemy started its “acquisition” with the supply side. “People use us because of our amazing instructors and unique content. So we initially identified the highest quality instructors who had a passion for teaching through organic relationships and outreach,” Yang said. Once Udemy had a core set of instructors with scalable courses, the shift then became demand. “You need to keep things in balance. We knew instructors wouldn’t stick around for long if they didn’t have access to interested students,” he said.

As Udemy started to think about supply side customer acquisition, it evaluated all the typical channels (digitally focused), from paid to organic. Yang highlighted two learnings from that experience:

First – “there is not a silver bullet to generating demand for a marketplace business, we had to do it brick by brick to reflect the breadth of our content.”

Second – “so many things didn’t work the way we thought they would. When you need to attract diverse supply and demand, there are no shortcuts and no magical deal is going to come in and make it all work.”

What Udemy did decide to focus on to build up its user base were these three things:

1. SEO. Udemy has a ton of content. It actively blogs, lists all of the courses it offers, and provides a writeup for each course so that prospective students know what to expect. The more courses it adds, they more “niche” content it produces across a wide spectrum of relevant keywords, especially tail terms. The site includes course preview videos, FAQs, and requirement specifications for all courses. Udemy also helps its community of instructors include the right keywords in course descriptions. The reviews section, however, is how the company has empowered an external audience to work for it, for free. Having multiple students comment about classes provides a layer of transparency needed in all marketplaces and means fresh content is produced and shared via social media daily.

2. Mobile. Yang cites the app store as a tremendous area of customer acquisition for Udemy, saying that people are constantly looking for new content and experiences. “Being discoverable on the app store for mobile users is a must-have, not a nice to have.” That makes sense, considering people are spending 30+ hours per month engaged with mobile applications.

3. Word of mouth. In addition to happy “students” spreading the word, Udemy has used its instructors to help the cause, and that’s been one of the most impactful methods of customer acquisition. “Most instructors we sign up have a following of some kind, so by adding more instructors we naturally are able to leverage their personal and professional networks,” said Yang. I especially like this method, as it’s the concept of empowering your supply side to spark wildfire growth for your demand side. The benefits are clear both for the marketplace and for supply side users, and it saves a boatload of cash that perhaps would have been spent on paid advertising, agencies, employees, tracking/optimization software, etc.

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A few final takeaways from Udemy’s growth story are around process focus and believing. Yang was adamant about the fact that marketplaces shouldn’t think about customer acquisition until their processes (product, operations, customer success, etc.) are near perfected. “If you have a leaky bucket, you’ll find out quickly,” he said, and in a world where you only get one shot at a first impression, ensuring that user experience from start to finish is as flawless as possible is worth spending more time on before moving to acquisition.

In terms of believing, Yang is passionate about Udemy’s success. “In the summer of 2013, we felt like we were in a dog hunt and still didn’t know if this thing was going to work. We had so many stops and so many opportunities to get off the bus along the way, but we stayed true to the course.” Udemy has now gained quite a bit of momentum (and funding), and by having an offering in high demand along with a notable supply and demand satisfaction rate, it seems set for a bright future.

Udemy’s story begs the question, where does paid advertising belong in marketplace customer acquisition? At which stage of company growth or funding does paid acquisition work? You could argue that paid advertising during the early days is a strategic oversight. While Udemy chose not to go with paid advertising for its initial ramp-up, paid media can work tremendously well (especially if you’re going after a targeted market). But the combination of SEO, app store, and word-of-mouth marketing is a force to be reckoned with when you want to attract a diverse audience.

So for all you budding marketplaces out there, before you start throwing money at paid channels, take a breath. Think about the growth you need over the next few years, not weeks or months. Certainly you’ll find a place in your marketing strategy for paid media in the long run, but you might also discover the combination of tactics that will establish your marketplace growth story for years to come.

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Dan Slagen advises startups, marketplaces, and marketing departments on strategy, revenue growth, and operations. You can follow him on Twitter @DanSlagen.